China and Her Coal

China and Her Coal

China has coal to burn-and plans to.

Coal-related statistics on China make for sobering reading. China is the world's largest coal producer (2.2 billion short tons in 2004) and consumer (2.1 billion tons). China's production in 2004 roughly equaled the combined production of the next four top producers (the United States, India, Australia, and Russia). The country also produced 243 million tons of coking coal last year, accounting for 53 percent of the world's total production. Underlying this huge output are vast reserves-according to the Ministry of Land and Resources, China had "proven" coal reserves of over 1 trillion tons in 2003, nearly 12 percent of the world total-and 26,000 coal mines employing nearly 8 million workers.

Given this abundance, it's perhaps not surprising that China has an unbalanced energy structure dominated by coal. Coal accounted for 69 percent of the country's primary energy consumption in 2005 (while oil accounted for 21 percent, natural gas 3 percent, and hydropower 7 percent), and for 75 percent of total electricity generation. Coal-fired powerplants accounted for 83 percent of new generating capacity installed in 2005. In addition, the country's roughly 410,000 industrial furnaces and 180,000 kilns that burn coal as fuel account for almost half of China's coal consumption. Most Chinese cities get their heat from coal-fired furnaces.

This heavy reliance on coal comes at great cost. To begin with, 3,306 accidents occurred at coal mines nationwide last year, killing 5,938 workers. Nearly three-quarters of the deaths occurred in county- or town-owned mines (as opposed to the relatively safer state-owned mines), and in fact statistics over the years show that accidents mostly happen in midsize, small, and very small coal mines, where the production safety challenges remain grim.

Coal use also puts daunting pressure on the environment. Energy-related pollution not only increases economic costs but also seriously threatens public health, and is one of the biggest social and economic challenges the country faces. Last year, for instance, nearly 26 million metric tons of sulfur dioxide were discharged into the air in China, of which 90 percent came from coal burning. The country also emitted nearly 20 million tons of particulate matter and other smog-forming pollutants, 70 percent of it from coal. In addition, coal contributed to 67 percent of total national nitrogen oxide (NO_x) emissions and 70 percent of China's 4.7 billion tons of carbon dioxide emissions. (Largely because of rising coal combustion, the International Energy Agency forecasts that China will become the largest emitter of carbon dioxide in 2009, surpassing the United States.) Coal-fired power plants and other coal-burning facilities also discharge roughly 495 tons of mercury each year, a total that is expected to increase by 20 to 30 tons annually for the next several years.

Currently the air pollution index in one-third of all monitored cities in China is above 100 (the worst it can be and still be considered "good"), while 30 percent of the country suffers from acid rain. Air pollution harms health-chronic respiratory disease caused by air pollution is a major cause of death in China-and has also caused severe economic damage. According to the China Green National Accounting Study Report 2004, jointly released in September 2006 by the State Environmental Protection Administration and National Bureau of Statistics, environmental pollution in general cost China 512 billion yuan (US$63 billion) in economic losses in 2004, a loss of over 3 percent of GDP. The share caused by air pollution was 220 billion yuan, 43 percent of the total. These figures are incomplete due to data constraints.

Pollutants from coal are also major contributors to climate change, the biggest challenge that the world faces this century. Its consequences will be too big to manage. China will experience more severe droughts and floods, shrinking and retreating glaciers, increases in agricultural production costs, and reductions in agricultural output. Global warming will also affect China's permafrost, marshes, wetlands, and deserts, and will lead to sea level increase and degradation of freshwater supplies and quality-all changes that are likely to be irreversible.

Chinese demand for coal is still rising. The National Development and Reform Commission, China's top economic planning agency, estimates that domestic coal demand will reach 2.5 billion short tons in 2010 and 2.9 billion tons in 2020. Demand from coal-fired power plants is projected to account for 61 percent of the total in 2010 and 70 percent of the total in 2020. Pollution from the increased coal production and consumption, if not abated, will worsen the already grim environmental situation. If no abatement action is taken, coal-related sulfur dioxide emissions are projected to reach 35 million metric tons in 2010 and 44 million tons in 2020. Smog and particulate matter will likewise increase by large margins.

China has already set concrete targets for reducing sulfur dioxide emissions: in 2010 the target is about 23 million tons, or 16 percent less than the 2005 level. This is a daunting task, since it requires both heavy technological inputs and huge financial investment. The country does not currently have a long-term target for the reduction of other pollutants, such as NO_x. Along with the gradual reduction of sulfur dioxide and the setup of a calculation mechanism, NO_x will hopefully soon make it onto the agenda.

In many cities that have the most serious air pollution, the government is trying to limit the operation of furnaces below a certain capacity. The Beijing municipal government has imposed very strict regulations, forcing the closure of coal-fired furnaces in the city proper and suburbs and replacing some of them with natural gas-fueled ones. Unfortunately coal is still used pervasively in midsize and small cities, towns, and rural areas as an everyday fuel.

As in most other places, a major reason behind the widespread extraction and use of coal in China is that its production costs and prices do not take into account its actual environmental and social costs. The distorted costs lead to low efficiency and huge waste, and hinder the development and adoption of clean coal technology. The average recovery rate of coal resources (the share of a deposit that can be economically extracted) at Chinese coal enterprises is only 40 percent, and small mines see a meager recovery rate of 15 percent on average, compared with the international average rate of over 60 percent. The lack of policy incentives contributes strongly to these low efficiencies; the government has been requiring compensation fees for mineral resources from coal producers, but the current average rate (ratio of compensation fees to sale prices) in China is only 1.2 percent, far lower than the foreign standard of between 2 percent and 8 percent.

Hou Yanli and Hu Min are program associates with the China Sustainable Energy Program, an NGO with offices in Beijing and San Francisco.